Reliance Wholesale Ltd v AM2PM Feltham Ltd

On dismissal of a winding-up petition after payment of the petition debt, the usual costs order is that the company pays the petitioner’s costs. That order may be displaced only where the company places sufficient material before the court to show why it should not be made. Payment under protest, with a reservation of the right to recover the money, does not by itself amount to an admission that the debt was due. The court assesses whether the petition was justified by asking whether there was a bona fide dispute on substantial grounds concerning the petition debt.

Reliance Wholesale Limited presented a winding-up petition against AM2PM Feltham Limited for an alleged debt of approximately £39,000. The company paid the alleged debt shortly before the hearing, and both parties agreed that the petition should be dismissed. The Chief Registrar made no order as to the petition costs.

Reliance appealed, arguing that the company should pay its costs. The central issues were whether the Chief Registrar had made a properly judicial decision on the costs dispute and, if not, what costs order should be made.

1. Appeal allowed on costs. The Chief Registrar’s decision was wrong in principle because he recognised that the issue was difficult to determine without the documents, but nevertheless made no order as to costs without being in a position to reach a judicial and fair conclusion on the disputed material.

2. The applicable principles, drawn principally from Re Nowmost Company Limited [1997] BCC 105, were that late payment of the petition debt ordinarily leads to an order that the company pay the petitioner’s costs. The company bears the onus of placing before the court the material relied on to displace that usual order. The material need not necessarily be formal evidence, but unsupported disputed assertions or submissions are insufficient. If the issue cannot be determined fairly on the available material, the court should obtain the necessary material or give directions for determination.

3. Payment under protest, with a reservation of a right to recover it, did not justify an inference that the company admitted the debt was due. The court therefore distinguished the inference referred to in Re Blackman (a debtor) [1999] BCC 446 and Yell.com v Internet Business Centres Limited [2003] SLT (Sheriff Court) 80.

4. The company had not shown a bona fide dispute on substantial grounds concerning £6,000 of the petition debt. The petitioner was therefore entitled to present the petition on that basis. The petition was dismissed only because the full amount was paid before the hearing, and the company was ordered to pay the petitioner’s costs, subject to assessment if not agreed.

1. High Court (Chancery Division): appeal from the order of Chief Registrar Briggs dated 5 December 2018. The appeal was allowed on the question of costs, and the company was ordered to pay the petitioner’s costs of the winding-up petition, subject to assessment if not agreed.
2. Chief Registrar Briggs: dismissed the winding-up petition by consent after payment of the alleged debt and made no order as to costs.